Brussels, 18 July 2017

 

Ladies and Gentlemen,

It's a pleasure to welcome you all to Brussels and to this public hearing on sustainable finance.

We are here because the EU needs a strategy to re-orient the financial system towards supporting long-term, sustainable, and green growth. This is a priority of the Juncker Commission, and it is an urgent task.

A couple of weeks ago, at the G20 summit in Hamburg, 19 countries put in writing that the Paris agreement is irreversible. The EU has already pledged that we will step up and take the global lead in implementing this historic agreement. We will deliver the transition to a low-carbon, more resource efficient, and sustainable economy.

Today's hearing is important, as the financial sector has a key role to play in enabling this transition. And it coincides with a growing momentum towards greener and more sustainable economic growth.

The automobile sector is a clear example, with a range of encouraging news in the past weeks:

  • On 5 July, Volvo became the first major car-maker to announce that all new models launched after 2019 will be electric or hybrids.

  • In Norway, sales of zero-emission cars in June were at record levels, at more than 27 percent of total sales.

  • And France recently announced that it aims to end the sale of gasoline and diesel vehicles by 2040 and become carbon neutral by 2050.

Ladies and Gentlemen,

If we want to seize the momentum and further strengthen the EU's leadership on sustainable and green finance, we need to do three things:

  • first, we need to set out a comprehensive strategy for sustainable and green finance;

  • second, we need to keep reforming our regulatory framework, to promote a sustainable investment culture and a broader view of risks; and

  • third, we need to ensure that capital flows towards green and sustainable projects and serves our long-term interest.

This is our agenda, and these are the points that I would like to discuss with you today.

 

 

Let me start with the strategy,

Over the next two decades, Europe faces an unprecedented investment challenge. We will need about €180 billion in additional yearly investment to limit the increase in global temperatures to well below 2 degrees Celsius.

But this challenge also presents opportunities for our wider economy.  By reorienting public and private financial flows towards green and sustainable efforts, we can help mitigate the risks posed by climate change, while creating new jobs and sustainable economic growth.

And we already see private investors starting to seize these opportunities:

  • In 2015, over €300 billion were invested globally in the clean energy sector, six times more than a decade ago.

  • So far, over 8 million jobs have been created globally by the renewables sector, including over 1.1 million in Europe.

  • Green bonds have helped support this development. Since their launch in 2007, the European Investment Bank has issued over €15 billion worth of its Climate Awareness bonds.

This shows that we are moving in the right direction. But we are not moving fast enough.

That is why our Capital Markets Union Action Plan calls for a comprehensive strategy to unlock the full potential of sustainable finance.

That is also why last December, the European Commission established a high-level expert group on sustainable finance.

This group of 20 senior experts is working - under the capable chairmanship of Christian Thimann - to deliver an overall vision for sustainable finance. In addition, they will set out concrete proposals for reforms to our regulations and policies to create a truly sustainable financial system.

 

This brings me to my second point, on regulatory reforms.

The EU is already at the forefront of integrating sustainability into financial regulation, for example when it comes to disclosure. For investors to accurately assess value and risks, they need transparency and data. But today, information related to long-term or less tangible factors is often hard to come across.

 

  • As of next year, our new rules on non-financial disclosure will require large companies listed in EU markets to disclose information on social and environmental aspects of their business.

  • We recently adopted guidelines to enhance transparency of companies on sustainability issues. These guidelines incorporate references to the work of the Financial Stability Board on climate-related financial disclosures.

  • Finally, our new rules on securitisation will require the disclosure of available data on the environmental impact of residential mortgages and auto-loans packaged in securitisations.

     

    We are also working on changing the investment culture and behaviour of market participants. For example, we have taken steps to incentivise pension funds and shareholders to take sustainability into account in their investment decisions.

With the mid-term review of the Capital Markets Union, we are further stepping up our ambition:

  • We are exploring ways to better integrate sustainability considerations in the investment mandates of asset managers and institutional investors.

  • We are analysing ways to encourage credit-rating agencies to take better account of sustainability and long-term perspectives in their ratings.

  • And we are looking into further embedding sustainability systematically as part of upcoming reviews of financial legislation.

These suggestions for reform mirror many of the early recommendations in the interim report published by the expert group last week. They will help us mainstream sustainability into EU financial regulation. But as the report also makes clear, they should go hand in hand with measures to shift financing towards long-term and sustainable needs, which brings me to my third point.

 

 

Green finance is booming. Overall, the value of green bonds issued in 2017 is predicted to reach €131 billion, up from €70 billion last year.

 

But there is still a lot of untapped potential in the market for green and sustainable assets.

 

  • To expand these markets further, we need to give institutional and retail investors clarity, and trust in the green or sustainable nature of investment projects.This will help prevent green-washing.

  • We also need to improve access for retail investors, to broaden the base of sustainable finance.

  • And finally, we need to give institutional investors the legal certainty they need to better direct their capital towards a long-term impact.

The interim report recommends actions in all these areas, which we will actively explore.

We believe that two suggestions in particular have great potential:

  • a classification system for green and sustainable assets,

  • and a European standard and label for green bonds and other green financial products .

     

    They should be explored further, as a step towards our long-term goal of establishing EU labels and quality standards for all sustainable assets.

These labels will provide the confidence and trust in sustainable and green products needed for investors to fund the transition to the low-carbon economy.  

 

Ladies and Gentlemen,

By committing to this agenda, Europe can become a magnet for investment for sustainably-driven businesses, and the global hub for green technological development. We have a window of opportunity to take the global lead on sustainable finance.

Thanks to the work of this high-level expert group, and to the feedback from everyone gathered here today, we should have the final report in about six months' time. This will be a milestone in our journey towards a more sustainable and green society.  

There is no time to lose - we will act on these findings by early 2018. And we are confident that we can count on your support in this effort.

I wish you all today a fruitful discussion.

Thank you very much.